Globally, over a billion people lack household electricity to this date, and most non-electrified households are found in Sub-Saharan Africa and South Asia. The high capital cost of extending a national or regional electric grid to remote rural communities is an important barrier to progress in household electrification.

No wonder, then, that the collapse of the cost of solar panels has created enthusiasm for off-grid electrification. Combined with ultra-efficient energy technologies, such as LED lights, less expensive solar panels have brought back the idea that countries could ‘leapfrog’ by supporting communities’ local off-grid electrification schemes instead of extending the electric grid.

Many scholars and practitioners are enthusiastic about this approach. Researchers from the University of California, Berkeley write in Nature Climate Change that “the present day is a unique moment in the history of electrification where decentralized energy networks are rapidly spreading, based on super-efficient end-use appliances and low-cost photovoltaics.” The environmental group Sierra Club states that “off-grid renewable energy technologies … are better suited to meeting the challenges of energy access than centralized coal projects and grid extension. That means we can solve energy poverty and climate change at the same time.”

An important question for the enthusiasts is how much energy is enough for off-grid electrification to make a real difference. LED lights are ultra-efficient but freezers, welding machines, and many other appliances still require substantial amounts of power. If off-grid electrification can deliver results for minimal loads of power, such as domestic lighting, the case for replacing or at least delaying grid extension is much stronger than if large loads of power are necessary for beneficial impacts.

In a recent Science Advances paper (open access), we (Aklin, Bayer, Harish, and myself) collaborated with an Indian solar microgrid company, Mera Gao Power, to assess the impact of basic energy access from a very small microgrid. In a randomized controlled trial, previously non-electrified households in Barabanki district of the state of Uttar Pradesh in India were offered, for 100 Indian rupees (about 1.5 U.S. dollars) a month, two LED lights and a mobile charger powered by a small solar panel and a battery.

Solar panels for a micro-grid that offers two bright LED lights and mobile charging to villagers in Barabanki district of the state of Uttar Pradesh, India.

We found that access to a minimal level of solar power did reduce kerosene expenditures, as households replaced their kerosene wicks with the solar-powered LED lights. The reductions were pretty substantial, too: where MGP installed solar microgrids, monthly kerosene expenditures decreased by almost fifty rupees (about 45%) relative to the control group.

This estimate is one-half of the MGP monthly fee and does not even consider that many households did not subscribe – so that many MGP customers with high previous kerosene expenditures likely reduced their expenditures even more. These reductions were achieved without government subsidies and at a low capital cost.

Now, the bad news: we found no evidence of broader economic benefits on outcomes such as savings, spending, business creation, and time spent working. The estimates were either zero or, in some cases, modestly positive but subject to large uncertainties.

While the basic energy access afforded by the MGP microgrids offered a substitute for kerosene, we did not find evidence of substantial effects on rural development. While we did not conduct a systematic study of educational (e.g., more study hours) or health benefits (e.g., less indoor air pollution), the evidence for benefits in other areas was weak.

These results do not mean off-grid solar power is useless, but they do raise two important questions. First, can larger systems that generate more energy produce better results? If households could run appliances and machines, they would be able to use solar power for a wide range of economic activities, making electricity access more appealing. However, larger systems are also more expensive and households – many of whom are poor – would have to pay higher fees to participate.

Second, could off-grid solar power furnish more benefits with complementary policies? The lack of electricity is far from the only constraint on economic growth in these communities. Access to finance, roads, water infrastructure, supply of skilled enough labor, and markets for products are all inadequate in the area that we studied. Solar power might have produced better development outcomes if some of these other problems had also been solved – be it by the government or a private company.

An important lesson from the study is how much India’s heavily subsidized kerosene hurts the growth of off-grid lighting solutions. We found that people reduced their kerosene expenditure by no longer buying kerosene from the private market, but by continuing to purchase their heavily subsidized quota from the government’s public distribution shops.

If India were to succeed in replacing traditional kerosene subsidies with cash transfers, or perhaps even vouchers for off-grid lighting solutions, the market for off-grid lighting would grow much faster. This change would not only bring environmental and health benefits, but also likely boost technology and business model innovation in off-grid electrification. Just replacing kerosene subsidies with more flexible social policy might make basic energy access through solar microgrids much more beneficial to the society.